The Joys of Timesheets

In this article we will be discussing the advantages of full time recording and how your firm could benefit from implementing this.

One of the key drivers of any business is profitability. The ability to assess whether work undertaken is going to give rise to a profit is very important. Without full time recording, a firm cannot understand the true profitability of the work it takes on.

Why is time recording so important?

Time recording plays an integral role in job management for fee earners, as it enables them to calculate a recovery rate on each matter which shows the profitability of cases. A recovery rate compares time logged to a matter (at a chargeout rate) against the fee charged.

If a job is making less than 100% recovery, it can be for a number of reasons. The fee could be too low compared to the cost of the person completing the work. There could be designated a high chargeout rate for a fee earner to try and “value bill” to some clients, perhaps with an expectation that 100% of time will not be recovered. The work undertaken could be a “loss leader” where it is priced low in an attempt to win further work from that client or where there are additional services that are billed at full rates. Or quite simply, the team may not working efficiently.

If fee earners are not working efficiently and, if they are fully recording time, then the firm can review billing statistics, identify low recoveries, investigate, and implement change to improve. Not only will this improve profit, but it should allow the firm to increase capacity to take on more work.

Do I still need to time record on fixed fee matters?

A common misconception is that time recording is not needed on fixed fee matters as the fee has already been agreed so it doesn’t matter. However, it is still important to understand whether these jobs are profitable and to ensure the fixed fee is set at the right monetary level.

How does it work in reality?

All fee earning staff would be required to record what they are doing every hour of the day. This could be done in 5 minute, 15 minute or 1 hour blocks, say.

A minimum number of working hours would need to be implemented on the time recording system which would reflect the fee earners agreed working hours.

Time gets recorded onto the client management system and forms part of the overall work in progress of the firm. Once logged in the system, further analysis and reporting should be undertaken regularly and key performance indicators set using this data.

If the time never appears on the finance system, then there is a gap in management information relating to the work that a fee earner is doing, and managing lock up is a much more difficult task.

Charge out rates should be set for the fee earner. These rates should include all salary costs plus all employment on-costs such as pensions and benefits. They should also include an element of overheads recharge. They must also include some level of expected profitability. There must then be a sense check to ensure that commerciality is being considered by considering local market rates, any degree of specialism, and good old fashioned supply and demand!

So the joy of timesheets can be concluded as data collation, to enhance management information and allow for profit improvement.